Geopolitical Risks to U.S. Oil Supply Lowest Since 1970s Says Baker Institute Report

• Security of supply and the stability of the oil trade remain components of US national security.
• US oil security has benefited from diversity, self-sufficiency and environmental pressure.
• Diversity of oil supply has improved globally as well as within the United States.
• The US presence in the Gulf remains based on oil and nonoil defense priorities.
• US will stay in the Gulf as long as allies remain exporters, and oil maintains strategic importance.

Climate policies also, ironically, enhance oil security due to the greater fuel efficiency and push toward alternative technologies and fuels. “Hence, the more Americans adopt alternate vehicle technologies and fuels, the more they insulate themselves from oil disruptions,” the authors wrote.

Despite these factors, oil stands to remain the world’s primary transportation fuel for decades, ensuring its strategic value and U.S. interest in protecting the trade.

“The security of America’s oil supply and stability in global oil trade remain critical components of U.S. national security,” the authors wrote. “While the potential exists for rapid shifts in energy systems at the regional level, energy transitions tend to occur slowly on a global scale. Geopolitical forces, by contrast, are far more volatile.

“As the Iranian revolution and the fall of the Soviet Union demonstrate, sweeping change can upend longstanding relationships overnight,” they wrote. “Ongoing trends in global oil markets appear to be pointing to continued improvement in the security of U.S. oil supply. U.S. domestic production is increasing, as is the geographic diversity of global oil supply, and environmental pressures are encouraging greater efficiency and adoption of substitute technologies. All of these factors contribute to U.S. oil security.”

However, trends in oil geopolitics point in the opposite direction, the authors said. “The Trump administration’s transactional approach to international relations has intensified the uncertainty of an already volatile period among oil exporting states,” the authors wrote.

“Since the onset of the Arab Spring uprisings in 2010, instability has been exacerbated by fiscal stresses of low oil prices, the rise in tension between Sunni and Shia Muslim-dominated regions and the attendant proxy wars in Syria, Iraq, Yemen and Libya, crumbling stability in Venezuela and a breakdown in relations among Gulf oil sheikhdoms. Most recently, the Trump administration has aggravated regional geopolitical tensions by taking sides in the intra-Gulf dispute. It has also created broad rifts with long-standing allies over its announced intention to withdraw from the 2015 Paris climate agreement,” the authors said.

Improvements to U.S. energy security despite rising tensions in oil-producing regions have prompted questions about whether the United States needs to continue enforcing the provisions of the Carter Doctrine that require Washington to maintain a large and costly military presence in the Persian Gulf. “Despite a strong prima facie case for drawdown, we argue that a continued U.S. presence remains compelling,” the authors wrote.

Looking to the future, U.S. oil security depends on development choices made in China, India and other Asian states where once impoverished masses are rising into the middle class, the authors said. “The oil intensity of China and India, as well as populous ASEAN states like Indonesia, will weigh greatly on future oil security in the United States,” the authors wrote.

The paper was funded by the Baker Institute.

Contacts and sources:
Jeff Falk
Rice University